Airlines' earnings may not take off

John SchmeltzerTribune staff reporter

Wall Street analysts on Tuesday dispelled the notion that the nation's domestic airlines would begin their return to profitability this year.

Instead of an improving bottom line, as many had been predicting, two of the aviation industry's leading analysts now say that industry losses will be higher than they had predicted a little more than a month ago. Still, the industry's loss for 2003 will be lower than last year's estimated loss of $7.4 billion.

The nation's major air carriers will begin reporting fourth-quarter and year-end results Wednesday. And among the nation's top 10 carriers, only Southwest Airlines is expected to post a profit.

For the fourth quarter, the industry is expected to lose about $2.5 billion. That's a slight improvement over the $3 billion loss in 2001's fourth quarter, but that period came shortly after the Sept. 11 terrorist attacks.

"With a possible war on the horizon, elevated jet fuel prices and broad business discounting, we have raised our loss estimate for 2003 from $3.6 billion to $4.5 billion," said Buttrick.

Linenberg said he is now estimating that the industry will lose $4.7 billion for the year.

The discounting Buttrick cited is driven by America West Airlines, which reduced business fares last spring, and United Airlines, which recently announced a reduction on business fares on flights from its Chicago and Denver hubs.

American Airlines, the nation's largest carrier, is testing reduced business fares on about 400 routes.

United cut business fares by 40 percent and eliminated the requirement for a Saturday-night stay on tickets to and from Chicago and Denver. Fares were also reduced for thousands of markets reachable via connecting service from those two hubs.

While the major network carriers, such as United and American, are expected to produce another year of dismal results, Linenberg said discount carriers should again be profitable.

He said operating costs at discount carriers, such as Southwest, American Trans Air and AirTran Airways, are lower, and they don't have large pension costs.

Continental Airlines is scheduled to release its fourth-quarter results Wednesday, followed by Delta Air Lines on Thursday. American and Southwest are slated to release financial results Jan. 22.